published Sunday, May 12th, 2013

Downtown Chattanooga apartment rents rose 20 percent to 30 percent in past few years

Construction continues on Walnut Commons, a new housing complex being built at the intersection of Walnut Street and Aquarium Way in downtown Chattanooga.
Construction continues on Walnut Commons, a new housing complex being built at the intersection of Walnut Street and Aquarium Way in downtown Chattanooga.
Photo by Dan Henry.
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COMING SOON?

A new apartment development at the corner of Market and Main streets soon may be announced. Jim Williamson of River City Co., the nonprofit redevelopment group that owns what's known as the Union Gospel Mission property, said it is working with a developer on a potential project for 50 apartments with commercial space on the ground floor.

Poll
Can you afford to live downtown?

James Jabaley lived at his one-room downtown Chattanooga efficiency for about a decade — until his rent suddenly spiked 23 percent to around $500 a month.

"He didn't care how long I lived there," Jabaley said last week about the apartment building's manager. "I felt abandoned."

Jabaley, who has since moved to the North Shore, is among downtown apartment dwellers seeing rents jump amid surging demand.

Some property owners have renovated newly purchased dwellings and started charging higher rents as a result. Others have consolidated what had been efficiency apartments into single units with one kitchen and three bedrooms with rents hitting upward of $1,300 a month.

One apartment complex downtown that had listed top-end rents at $850 a month last summer now charges about $1,000 monthly.

Marcus Lyons, a commercial real estate broker in Chattanooga who specializes in apartments, said the overall rate of increase in apartment rents downtown in 2012 alone was about 8 percent, nearly twice that of typical garden-style apartments in the suburbs.

But over the past three or four years, estimated downtown rents are generally up 20 percent to 30 percent, said Jay Robinson, owner/broker of Robinson Real Estate Inc.

And the trend is for higher still, he said.

Even though new apartment units are under construction in the central city -- and more are planned -- demand is expected to remain strong, experts said.

"Occupancy is extremely high," said David Wilson of the Rock Apartment Advisors real estate services firm in Birmingham, Ala., which tracks housing markets in the Southeast. "Occupancy puts pressure on rents."

Wilson, who was in the city checking out the market this month, said there are waiting lists for apartments in downtown in some cases.

Lyons said rents downtown have risen because of a lack of product, a growing university and a thriving downtown.

"Chattanooga has the perfect storm," he said. "Owners look at rental pricing power as supply and demand."

UTC AREA

Some say rents around the University of Tennessee at Chattanooga have especially jumped amid a flurry of purchases and renovations of properties over the past year. About a dozen small- to medium-sized apartment buildings changed hands, including five that were sold twice in nearly 12 months.

In addition, a South Carolina company that specializes in offering housing near college campuses bought around a half-dozen sites near UTC.

"We think the city is going like gangbusters," said Walk2Campus Properties market manager Roe Elam.

Jabaley and others believe some apartment owners are more interested in landing college students than other renters.

"If someone comes from Nashville, it seems like a steal," he said.

MORE SUPPLY

Nearly a half-dozen more apartment buildings are under construction or in the works downtown.

Chattanooga developer John Clark and partners David Hudson and Bob McKenzie are raising Walnut Commons, which when finished at Walnut Street and Aquarium Way will be the biggest complex downtown in a generation.

The $11 million, four-story project will include 100 apartments built above an expanded Little Miss Mag Early Learning Center on the first floor along with parking.

Clark earlier put apartment rents in the range of $750 to $1,200 a month. But last week he declined to give numbers, saying only that rents will be "market rate and comparable to other complexes."

"Rents are going up. Apartment buildings are filling up," said Clark, who also is redeveloping the former St. Barnabas senior apartments downtown.

John Wise, another Chattanooga developer, said he has two or three apartment projects under way and more in the pipeline.

He said people like to live downtown because of the activity, amenities and proximity to work. New jobs created in recent years have brought newcomers to the city, and they often like to live downtown, Wise said.

"People from larger towns are moving to Chattanooga," he said. "They're more apt to be downtown than in a suburb."

Jim Williamson, vice president of planning and development for the nonprofit group River City Co., said downtown needs more apartment inventory, especially in its core.

"Where we're lacking is [around] UTC, Martin Luther King [Boulevard] and city center," he said.

Williamson noted that when the Cameron Hill Apartments were felled to make way for BlueCross BlueShield of Tennessee's new corporate headquarters four years ago, about 300 units were taken away and haven't been replaced in full.

He said higher rents are a concern, however. If rents go too high, people may look at purchasing housing again, which isn't necessarily bad for downtown as a whole, Williamson said.

"There's a balance there," he said.

Williamson added that there's a need for all kinds of price points in terms of downtown apartment living.

"We want a diverse market," he said.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.

about Mike Pare...

Mike Pare, the deputy Business editor at the Chattanooga Times Free Press, has worked at the paper for 27 years. In addition to editing, Mike also writes Business stories and covers Volkswagen, economic development and manufacturing in Chattanooga and the surrounding area. In the past he also has covered higher education. Mike, a native of Fort Lauderdale, Fla., received a bachelor’s degree in communications from Florida Atlantic University. he worked at the Rome News-Tribune before ...

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